Multi-Asset

Looming Lower Returns Demand Creative Multi-Asset Response

November 19 2021

Active management and a broad toolkit may be necessary.

Key Insights

  • Equity and bond markets are expected to deliver lower returns over the next five years than in recent periods. This will impact multi‑asset portfolios.
  • One way for multi‑asset investors to boost potential returns is by increasing risk exposure in their portfolios, either between or within asset classes.
  • Active management can potentially enhance performance both through dynamic asset allocation across asset classes and through security selection within each asset class.

Investors are often heard to say that “more jam today means less jam tomorrow.” In other words, an asset generating high returns in one period is likely to struggle to deliver continued elevated returns in following periods. Or, to put it another way, a higher price today means lower returns tomorrow. This is particularly the case at the asset class level, where it is difficult for investments to defy the gravitational pull of fundamental factors such as long‑term economic growth, inflation, productivity gains, and demographics indefinitely.

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